Carvana Co. (NYSE: CVNA), an e-commerce company for buying and selling used cars, yesterday offered 4,200,000 shares of its Class A common stock at a price of $65 per share. The SEC does not yet have a filing confirming the results of the proposed transaction, but lately the market has been wary of such offerings from companies that are not solidly profitable. Carvana’s negative net “profit” is more than -3%. During Q1 the company reported ($0.55) earnings per share for the quarter, missing the Zacks’ consensus estimate of ($0.49) by ($0.06). In addition, Carvana wanted to grant the underwriters the right to purchase up to 630,000 additional shares of Class A common stock at the offering price. The offering was increased from the previously announced offering size of 3,500,000 shares of Class A common stock.
The offering is subject to customary closing conditions. Wells Fargo Securities, Citigroup and Deutsche Bank Securities acted as book-running managers for the proposed offering.
Carvana also announced the pricing of $250.0 million of additional 8.875% senior notes due 2023 (the “new notes”) in a concurrent private placement to qualified institutional buyers, in an offering exempt from registration under the Securities Act of 1933, as amended. The new notes will be issued as additional notes under the indenture governing the outstanding $350.0 million of senior notes that were issued on September 21, 2018.
In an SEC filing yesterday, Carvana said on May 24, 2019, Carvana Co. issued $250.0 million in aggregate principal amount of 8.875% Senior Notes due 2023 (the “New Notes”). The New Notes were issued as additional notes pursuant to the First Supplemental Indenture, dated as of May 24, 2019 (the “Supplemental Indenture”), among the Company, the guarantors party thereto (the “Guarantors”) and U.S. Bank National Association, as trustee (the “Trustee”). The Supplemental Indenture supplements the Indenture, dated as of September 21, 2018 (the “Indenture”), among the Company, the Guarantors and the Trustee.
Carvana intends to use the unknown net proceeds from the public offering of common and the private placement of new notes for general corporate purposes. Carvana “may use the net proceeds from these offerings to partially repay borrowings under its floor plan facility until it identifies other specific uses.” Buyer beware it’s selling equity to pay down debt.
Founded in 2012 and based in Phoenix, Carvana’s stated mission is to change the way people buy cars. By removing the traditional dealership infrastructure (and the cost associated with state licensing of dealerships) and replacing it with technology and a vague (to AutoInformed’s eyes) customer service promise, Carvana offers consumers an online car buying and financing platform. Carvana.com enables consumers to quickly shop more than 18,000 vehicles, finance, trade-in or sell their current vehicle to Carvana, sign contracts, and schedule as-soon-as-next-day delivery or pickup at one of Carvana’s automated Car Vending Machines.